The future will be driven by big data

Every online interaction is a data point. What consumers buy, read, like, watch, discuss – all of this data makes up their digital identity. And as more everyday products go digital – fridges, watches, thermostats, wearables – the amount of data businesses can capture about their customers is growing at a shocking rate.

What can businesses learn based on all of that information? How can they use that data to deliver better shopping experiences and build lasting customer relationships?

Consumers exchange data for value

People are waking up to the power of their data. Consumers know brands want their information but, unclear on how brands will use it, are reluctant to share. The onus is on brands to entice them to share through a value exchange. Consumers are willing to trade data with the brands they trust, with one caveat, says Bazaarvoice CMO Lisa Pearson:

“We’ll all get used to the idea of trading our personal data. It’ll become a currency… we’ll do that because we’ll get value in return… the new ROI is going to become ROD, and people are going to expect a return on data.”

This post is an excerpt from The Social Trends Report 2014. Download the full report here to learn 2014s top trends from the world’s foremost marketers, social strategists, and business thinkers shaping the digital marketplace.

Without analysis, people get little value from the information they generate every day. They can’t act on it; it doesn’t make their lives better. But they’re willing to turn over that information for something that does make their life better, says Steven Brennan, SVP of Creative Technologist, Arnold Worldwide:

“Our consumers are increasingly sophisticated. They are really comfortable with giving up a little bit of privacy or a little bit of information if there’s a value exchange… if providing them utility, or insight, or reviews, or more personalized things in a soft way.”

That is the real key, says Bazaarvoice VP of Marketing Communications Scott Anderson – using data to better serve customers, creating a two-way street that serves both parties:

“With big data and intelligence, we’re understanding more than ever before the behaviors and the preferences of the consumers out there. So there’s an opportunity, again, for us to be the advocates for the customers that we serve.”

It may be as simple as offering relevant discounts to the best customers, suggests Senior Manager of Product Management, Gap Inc., Christina Thorpe:

“I think it’s personalizing how you talk to [the consumer] through whatever channels you do so, creating product recommendations, promotional offers or other content offerings that are more meaningful to her.”

But serving customers better doesn’t just have to mean discounts. People will expect a more personalized relationship that rewards their loyalty and sharing, says Tod Szewczyk, VP, Director of Innovation at Leo Burnett,

“If you’re sending something that’s valuable to somebody, that doesn’t have to be a coupon per se, but it is something that’s a valuable, relevant message to them. So maybe it’s a loyalty thing where you’ve been in the store a couple times, and you’ve bought a number of different products. Maybe it’s a recommendation on something else that might be able to help you. Those are the kind of value exchanges that I think make it worthwhile.”

Essentially, consumers are looking to brands to be a true partner, not just a vendor. They’ll tell businesses more about themselves if companies use that information as a friend would – to know them better and develop an increasingly personalized relationship. For example, through personal information like buying history, past reviews, social network data, and self-reported preferences, businesses can suggest highly relevant products to shoppers, with a better guarantee that it’s the right product for that individual. Bazaarvoice’s Pearson elaborates:

“In 2014 we’re reliant on the opinions of others for determining how to make purchasing decisions. We rely on word of mouth from friends and family, and we rely on reviews from strangers. And all of that input actually helped us answer the question, ‘Do people generally like this?’ But in 2020, the question we really want answered is, ‘Will I like this?’”

Bias and assumptions cloud data-based decision making

While personalization and deeper customer understanding sound great, most marketers haven’t yet reached the data literacy needed to deliver these experiences for two reasons. First, the volume of data available is staggering, and deciding which data is relevant to certain business decisions is a challenge in itself. And second, once the right data is available, the tools needed to meaningfully interpret it aren’t quite sophisticated enough yet.

Meanwhile, today’s marketplace changes with lightning speed, leaving little time to answer those two questions. This leads marketers to snap decisions based on data correlations that don’t necessarily show causation, says author and founder of FiveThirtyEight.com Nate Silver:

“If you’re betting on a correlation in the data and you don’t understand the cause behind it, then I would like to take the other side of that bet. You have to be careful here. When we have an infinite number of searches that we can run in the data, finding relationships that are statistically significant and correlated is not the same as finding ones that will predict things and be meaningful as you go forward… If you’re not careful, you’ll start seeing patterns in the random noise.”

Silver goes on to warn against research bias. It can be tempting to seek out only the data that proves a desired argument or encourages the desired action. This in turn leads to faulty analysis and bad decisions, he says:

“[Researchers] have a view about what the world looks like, what the answer they want to see is. Then they find the data to prove it, and act like they’re being empirical… You have some initial views of the system that are based on your accumulated knowledge, or your incentives, or your biases, or what you think you know… Maybe the data is objective, but we all have a subjective view of it… Sometimes it leads us to see the data in a rose-colored way. Just having an awareness of that fact, I think, is pretty important.”

This post is an excerpt from The Social Trends Report 2014. Download the full report here to learn the top trends from the world’s foremost marketers, social strategists, and business thinkers shaping the digital marketplace.